"It’s important to remember that buying and selling has always been a regular part of the buy-to-let market as landlords switch focus, improve their portfolios and pursue greater yields"
There always seems to be much talk in the press about buy-to-let in crisis, especially with the term ‘mass exodus’ a clear favourite among publications. Whilst we cannot deny that it is challenging at the moment for many reasons, buy-to-let is far from dead and buried.
Those that write off the sector now or after the ‘mini-budget’ last year are probably the same that wrote it off after the many other crises buy-to-let has weathered in its 30-year history. Say what you want about the sector, but it’s mature and incredibly resilient, not just surviving changing governments, policies and economic crises, but thriving too.
Both landlords and brokers are all too aware of the complex factors in play, whether it’s interest rates and the impact on affordability or changes to capital gains tax, the dividend tax cuts or the proposed changes to EPC requirements on the horizon.
Challenges though also present greater opportunities, for example, landlords taking up the chance to purchase at a competitive price - improving the yield in the process. Despite the challenges, we’re still seeing landlords, especially those with sizeable portfolios looking at opportunities to expand.
Expanding portfolios
Our most recent quarterly landlord survey revealed that more than four out of 10 (41%) buy-to-let landlords intend to buy additional property in the next 12 months. Not only is this consistent with our Q4 2022 results (42%), but the strongest sentiment remains among those landlords with larger portfolios.
More than half (54%) of landlords with portfolios between 11 and 20 properties intend to buy, while 40% of those with more than 20 properties shared the same sentiment.
When asked for their reasons, 35% of respondents cited the rising number of tenants looking for property – an increase from 30% in our Q4 survey. A potential drop in house prices also remained a key consideration, however, this fell from 54% in Q4 to 33% this time. This likely points to house prices remaining more robust than some landlords had originally expected.
Nonetheless, this is incredibly positive news, especially when you consider just how important the private rental sector (PRS) is to the wider housing mix in the UK. Whether it’s for students, transient workers, those lacking deposits or people with no intention of ever buying, quality landlords expanding their portfolios is essential to meet demand.
Selling properties
Just as important is landlords remaining in the market. Rather than a ‘mass exodus’, the majority of respondents (64%) said they had no intention of selling any of their properties in the next 12 months. As you’d probably expect, landlords with the strongest intention were those with either individual properties (75%) or small portfolios of two or three properties (69%).
Interestingly though, 65% of landlords with more than 20 properties shared the same intention. Once again, we should certainly be encouraged by this.
Meanwhile, the number of landlords planning to sell some of their properties did increase slightly to 30% - from 28% last time. Only 6% said they plan to sell all their properties with respondents split across landlords of all sizes.
Selling is part of BTL
It’s important to remember that buying and selling have always been a regular part of the buy-to-let market as landlords switch focus, improve their portfolios and pursue greater yields. In some cases, those properties – especially multi-dwellings are picked up by other landlords or sold for development, rather than to owner-occupiers.
It’s clear though that some are finding it harder than others. The majority of those planning to sell (60%), cited rising interest rates as a key factor. Others mentioned rent not covering costs, landlord taxation or the cost of meeting EPC requirements. With £66 billion of buy-to-let mortgages set to mature this year, there will be many weighing up their options.
But rather than talking down the sector or leaving stretched landlords to feel like there’s no alternative, we must all give those landlords our full support.
As a specialist lender to the buy-to-let market, we’re constantly looking at ways to not only support buyers but those remortgaging too. By utilising our own in-house broker portal, we’re able to constantly innovate and strengthen our offering and make products accessible to help brokers meet a broad range of landlord requirements.
